The Value of New vs. Renewed Members (CASE STUDY)

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“Get as many new members as possible” may not the the most effective primary goal for cultural organizations.

You’ve likely heard this popular statistic: It costs between five to twenty-five times more to acquire a new customer than it costs to keep an existing one. But could this be true for securing and retaining members to cultural organizations? IMPACTS did the math for one of our clients, and I’m sharing the results in today’s Fast Facts Video.

Know what I don’t share much? Case studies. At IMPACTS, we have a lot of them. I don’t share these as often as aggregated, big data for three reasons. First, I believe that there’s an opportunity for organizations themselves to share more honest case studies more often. Second, case studies are ripe for dismissals when they reveal things that are difficult to swallow (After all, case studies tend to be about one organization). And third, case study envy – which often results from organizations sharing case studies for the wrong reasons- can cause big problems for industry evolution.

This isn’t to say that case studies themselves are a problem. They can be very helpful in illustrating the how initiatives work! When professionals keep their thinking caps on, case studies can be incredibly helpful for providing insight or valuable avenues for exploration.

The organization studied here is a mission-based, visitor-serving organization with more than one million annual attendees. This organization’s membership strategy – while constantly evolving alongside best practices – is not “new.” There are no special situations here such as limited resources on one end (attracting vs. retaining members) in particular, limited years of experience, or lack of expertise.

Now onto the topic of membership!

Customer retention is important and there is a lot of information out there on customer retention vs. acquisition. What does this mean for membership to cultural organizations? Do numbers still hold? In this case, we wanted to assess the total costs, total revenue, and the total net revenue of acquiring vs. retaining members for an IMPACTS client organization. After all, knowing this information can help an organization align its priorities and budgeting so that it is maximizing revenues.

Collecting as many members as possible sounds like a good goal… but is keeping as many members as possible a better one?

Let’s stage a showdown:

ROUND 1: COST

Let’s start by looking at the costs to acquire vs. retain members for this organization over the course of five years. The “new member” category is the average amount that the organization spent per new member that they acquired. The “renewed member” category shows how much was spent on average to renew somebody who was already a member.

In year one, it cost $22.74, on average, to attract a new member. Meanwhile, it cost only $4.51 to retain the average, existing member. The costs remained similar throughout the five years. The average total cost to acquire a new member was five times the cost of keeping an existing member.

This makes sense. Folks who are already members have already been “sold” on the idea of membership. They are already users. They get what you stand for and how you actualize the membership benefits that most attract them to your organization. In a nutshell, they are an easier “sell” because they’ve already been “sold.”

ROUND WINNER: RENEWED MEMBERS

ROUND 2: VALUE

This chart shows the average annual revenue value for acquired vs. retained members over the five year duration. Basically, it shows how much money came in from a new member, on average, verses how much came in from a renewed member, on average.

The “Year 1” values are the same because they start with two, new members. To make this fair, there needs to be the same starting point. It wouldn’t be helpful to start “Year 1” with someone who had been a member for years and compare that person to a new member. The average membership value for a person was one $114.32 that first year, so that is in both categories. (Also, the average value of a new member changes each year as there are different numbers of people buying different memberships each year, and these numbers show the annual average revenue per member.)

In year two, we’re looking again at a new member in the new member category, but for those who got their membership even one year before, their average value was $20 more!

During the five year assessed duration,the average total value of a renewed member was worth 35.7% more than that of the average total value of a newly acquired member.

Renewed members are more likely to make additional donations and purchase higher-level memberships than new members. Simply, they’ve been involved with the organization as a kind of “insider” for a longer period of time. They have a better idea why they are members and have seen the benefits in action. They have a deeper understanding of how well your organization walks its talk.

Building relationships often takes time. It takes time in life. It takes time in philanthropic giving, and it takes time in membership engagement. Renewed members have had more time in this relationship, and they may invest/give accordingly.

ROUND WINNER: RENEWED MEMBERS

ROUND 3: NET REVENUES

Now, let’s put cost and value together and consider the net revenues of retained versus newly acquired members. If these numbers look familiar, it’s because they come directly from the information that we’ve just discussed.

Who is the winner in the “New Vs. Renewed Member Prioritization Battle,” (such that one may exist somewhere)? It’s renewed members. During the five-year assessed duration, the average net value of a retained member was 66.1% greater then that of an acquired member.

OVERALL WINNER: RENEWED MEMBERS

While this information may be unsurprising to many, my hope is that sharing it may add extra oomph to inform allocations of time and budget related to membership strategies.

Members are an important audience for cultural organizations, but they are hardly the single “membership” audience that we risk assuming them to be.